Supreme Court Will Review i4i vs. Microsoft Case

The U.S. Supreme Court today issued a notice that it will hear Microsoft's appeal concerning the i4i patent case.

The appeal grant comes months after Microsoft lost a patent infringement lawsuit brought by Toronto-based i4i LLP. After appealing the damages and losing, Microsoft applied to the Supreme Court. i4i has been awarded more than $290 million in damages by an East Texas court. A jury found in May 2009 that Microsoft had "willfully infringed" i4i's patented "custom XML" technology by incorporating it in certain versions of Microsoft Word.

Microsoft's appeal to the Supreme Court, which is called a "writ of certiorari," was filed on Aug. 27, 2010. By approving this appeal, the Supreme Court invokes a review of lower court rulings in the i4i case. However, the issues may extend beyond the i4i case since Microsoft's appeal challenges the legal standard used by the courts to protect i4i's patent.

David Howard, corporate vice president and deputy general counsel for litigation at Microsoft, suggested that broader patent legal issues are at stake.

"We are gratified by the Court's decision," Howard said in a released statement. "It's a clear affirmation that the issues raised in this case are critical to the integrity of our patent system. We look forward to presenting our case to the Supreme Court."

Microsoft hopes to gain a new trial as an end result of its appeal. The company's main argument in the appeal is that the courts do not require "clear and convincing evidence" to disprove a patent when the United States Patent and Trademark Office (PTO) lacked prior-art information before approving the patent. Microsoft cited the Supreme Court's reasoning in the KSR International Co. v. Teleflex Inc. case to make that point.

Loudon Owen, i4i's chairman, contended that Microsoft's challenge to the evidentiary process in upholding patents, if successful, will lead to multiple patents being questioned in the courts. It's not just about i4i's custom XML patent, he explained.

"What it [the appeal] does is it materially throws into question the validity of every single patent in the United States," Owen said in a phone interview. "It means that everybody, large and small, who holds a patent, now has an asset which is worth less. And it's uncertain if it [the patent] is enforceable."

In a separate process from the Supreme Court's review, Owen said that the PTO last week rejected Microsoft's appeal for the PTO to reexamine i4i's patent. The PTO rejected Microsoft's ex parte application appeal to review U.S. Patent No. 5,787,449, which is i4i's custom XML patent.

Microsoft has not paid the more than $290 million awarded to i4i by the East Texas court. Owen said that Microsoft doesn't have to pay it as long as it has appeals filed in the courts. There aren't limitations on the amount of appeals that can be filed, but Microsoft's lawyers would have to present new evidence every time, Owen explained. However, he added that Microsoft did not appeal the damages and willful infringement finding in its Supreme Court appeal.

"The only issue they appealed was a very narrow issue about the standards they believed should have been applied at the time the jury examined the validity of the patent," Owen said.

i4i and Microsoft will present their views at the Supreme Court in March or April of 2011, according to Owen. The court's decision is expected to be handed down sometime in June of 2011, he added.